Warren McKinnley Dowdy - Page 7

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          petitioner is not entitled to the charitable contribution                   
          deduction claimed on his return, and respondent’s disallowance of           
          that deduction is sustained.                                                
          2. Schedule C Items                                                         
               The Schedule C included with petitioner’s return shows a net           
          operating loss of $62,884, that, as described above, consists of            
          cost of goods sold, plus various expense deductions.  Cost of               
          goods sold is properly taken into account in determining a                  
          taxpayer’s net income or loss from business, as are business                
          expenses deductions.  Sec. 162(a); sec. 1.162-1, Income Tax Regs.           
          Items that are included in the taxpayer’s computation of cost of            
          goods sold as well as business expense deductions must be                   
          properly substantiated.                                                     
               Petitioner did not maintain any books of account for the               
          business.  At trial, petitioner suggested that if given more                
          time, he would be able to produce bank records, canceled checks,            
          and retirement plan documents that would support his claim to the           
          items shown on the Schedule C.  The record was held open for                
          approximately 90 days to allow petitioner to obtain and submit              
          additional evidence, but he failed to do so.  As it turns out,              
          other than petitioner’s vague testimony on the items, nothing in            
          the record supports his claim to the cost of goods sold or                  
          deductions claimed on the Schedule C.  Respondent’s disallowances           
          of those items are sustained.                                               






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